Tower Loan of Mississippi, Inc. - Page 15

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          supra.  See Estate of Bosch v. Commissioner, 387 U.S. 456 (1967).           
          Petitioner has not utilized its control over AFLIC so as to                 
          improperly shift income.  Rather, there has been a deflection of            
          income by operation of Mississippi State law.  See Procter &                
          Gamble Co. v. Commissioner, 95 T.C. at 341.                                 
               Accordingly, we hold that an allocation under section 482 is           
          unwarranted and an abuse of the respondent’s discretion.                    
          Issue 2. Bad Debt Deduction                                                 
               Petitioner took a deduction under section 166(a) for the               
          Cooper debt which AFLIC assigned to AFIC in July 1989.8                     
               Section 166(a) provides a deduction for any debt which                 
          becomes worthless during the taxable year.  The amount of the               
          deduction for a bad debt is limited to the taxpayer’s adjusted              
          basis in the debt as provided in section 1011.  Sec. 166(b);                
          Perry v. Commissioner, 92 T.C. 470, 477-478 (1989), affd. without           
          published opinion 912 F.2d 1466 (5th Cir. 1990).  Whether, and              
          when, a debt becomes worthless is determined by looking at all              
          the facts and circumstances including the value of the                      
          collateral, if any, securing the debt and the financial condition           
          of the debtor.  Sec. 1.166-2(a), Income Tax Regs.  Generally, a             

               8    Since AFIC was a member of the affiliated group with              
          petitioner, AFIC’s operations were included in the consolidated             
          filing.  Sec. 1.1502-76(b)(1), Income Tax Regs.  The common                 
          parent shall be the sole agent for each subsidiary in the group.            
          Sec. 1.1502-77(a), Income Tax Regs.  As common parent, petitioner           
          is authorized to petition and conduct proceedings before the                
          Court on behalf of all members of the group.  Id.                           

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